28 October, 2014

Wage disclosures for public officials lead to salary cuts, high turnover rates

Wage disclosures for public officials lead to salary cuts, high turnover rates: In the era of big data, transparency has become a popular policy tool for addressing potential problems. But publicly disclosing personal information — such as government officials' income — may result in unintended consequences.

Using California as a case study, a researcher from Princeton University's Woodrow Wilson School of Public and International Affairs shows that city managers — typically the highest-paid city employees — saw an 8 percent reduction in pay after their salaries were disclosed to the public. These cuts also triggered a 75 percent increase in the quit rate among city managers.

The findings, released as a working paper by the National Bureau of Economic Research, suggest that top salaries are cut because they appear excessive, regardless of whether the reductions in pay are good policy. Additionally, the research suggests that media exposure restrained high wages in cities where the top salaries were already disclosed.

"On the surface, transparency seems unambiguously good. Why wouldn't we have transparency?" said Alexandre Mas, professor of economics and public affairs and author of the paper. "This paper shows that there may be unintended effects from these policies. If the public has an averse response to large salaries, regardless of whether these salaries are justified, there might be adverse consequences."